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Sabana REIT: 2Q FY2011.

Thursday, July 28, 2011

I have been accumulating units in Sabana REIT even after it went XD the first time round, convinced that it has many high quality assets and that the income distribution is sustainable for the foreseeable future.

Last night, it released results for 2Q FY2011 and results were largely in line. DPU of 2.18c was declared, slightly less than my expectation of 2.2c. At the current unit price of 94.5c, it means a distribution yield of 9.23%.

Some numbers:
NAV/unit: 98c.
Gearing: 25.1%
Interest Cover Ratio: 7.6x

Nothing exciting but I will be keeping an eye on gearing and interest cover ratio. Gearing increased by 0.2% while interest cover ratio went down from 7.9x to 7.6x. There was also a higher drawdown of rental support for 9 Tai Seng Drive. In the near future, these are perhaps not really big concerns but if they persist, they could be.

Better quality assets aside, if the management is not doing a good job, they could destroy a good thing. Well, we will have to wait and see. Meanwhile, enjoy the dividend.

See presentation slides here.


Paul said...

Regardless of how good the yield looks, I think my biggest reservation about Sabana is that it does not have an A-list sponsor and the quality of the management is unknown.

In fact, it will probably take another crisis to find out the quality of the management.

Just like we found out that MIT, Allco, B&B management were bad and all the A-lister-sponsor REIT turns out more or less OK.

CIT is a strange one. It was doing more than OK during the crisis than after. Which left me scratching my head.

I would still prefer CLT which offers slightly lower yield; or MIT or MLT for peace of mind.

Anonymous said...

Good morning AK

Nice to see your new updates on Super Banana.

On the DPU, I was expecting something near or equal to forecast rather than above it as with the previous payout - which I suspect that the management was having to fulfill it's IPO promise.

"Amortization of intangible
asset is 16.2% higher than
forecast due to higher drawdown of rental support for 9 Tai Seng Drive"

What is "draw down of rental support" ?

It would be nice that there is Qtr-Qtr comparison table too.

While some basis point drop on yield is a concern for some, I am currently contented that it is above 9.xx%. Hoped that this maintains, if not improved upon.

Huat ah.


AK71 said...

Hi Paul,

Yes, the REIT lacks a strong sponsor and the management lacks a track record.

However, given its numbers, it would take an exceedingly incompetent management to botch things up.

MI-REIT and Allco went under in the last recession because they were over-leveraged, amongst other things (an example of a blunder by Chris Calvert at MI-REIT comes to mind).

Well, like I always say, if we do not feel comfortable about a company, don't invest in it. :)

AK71 said...

Hi SnOOpy168,

Sponsors usually give some kind of rental support but this is usually in the early days of the REIT. So, in case rental income fails to live up to expectations, it is supported by sponsors.

Naturally, such support will expire in time and the REIT must stand on its own two feet. Not something I am concerned about now since I am interested more in how much I would receive in income distribution.

However, it would become a concern in future when such rental support expires AND if rental income still falls short. We shall have to wait and see.

Anonymous said...

Hi AK,

I am thinking of getting some Sabana reit during XD as the price currently is too high.

Is it still recommended to buy some of this stock? What price do you think will be a good price to enter at XD?

Thank you


AK71 said...

Hi Phyllis,

I cannot recommend or not recommend any stock. ;)

If you think the price is too high now and want to wait for XD before initiating a long position, you must have some strong feelings about it, I am sure.

What price to buy at? It depends on what you feel is a fair price.

Personally, I would like to buy more on weakness too. 92c? Perhaps.

Anonymous said...

topped up some Super Banana at 0.935CD. Hoped that I read the announcement correctly that XD is 4 Aug 11, 17:00hrs.

Effectively making this purchase, about 0.9132 + brokerage. Cheaper than my previous 3 attempts at this counter.

Yes ?

Huat ah everyone.


PS: I really envy the view from your old flat AK - The no blockage and windy feel.

AK71 said...

Hi SnOOpy168,

It seems that Sabana REIT went XD today. At least, I see that on my screen. You might want to check it out.

As for the view from my place, I hardly spent any time at the balcony when I was staying there. I only used the balcony for my laundry. Haha... Oh, well.

Anonymous said...

Opps. Hahahah.... Little knowledge goes a long way lah.

Still @$0.935 was an acceptable price for me. Just have to wait another 3 months more.

Was thinking between this and AIMS REIT, whose prices has been 21.5-22 most of the time. Boring but steady.

8 ^-^ 8


AK71 said...

Hi SnOOpy168,

I hope to increase my investments in both AIMS AMP Capital Industrial REIT and Sabana REIT if their unit prices should weaken from here.

They will be important contributors to my passive income stream, I have no doubt. :)

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